Impact of Taxpayer First Act on Exempt Organizations

The Taxpayer First Act was signed into law on July 1, 2019, and makes changes to the management and oversight of the IRS.  There are two significant items included in the Act that relate to tax-exempt organizations.

E-Filing

Under the old law only certain exempt organizations were required to electronically file their annual information returns.  Tax-exempt corporations with assets of $10 million or more and that filed at least 250 returns (W-2s, 1099s, 941s, etc.) during a calendar year were required to electronically file Form 990.  Private foundations and charitable trusts that filed at least 250 returns during a calendar year, regardless of their size, were also required to electronically file.  Finally, small organizations that filed Form 990-N were required to electronically file the postcard form. 

The new law requires all exempt organizations to electronically file the Form 990 series, Form 990-T or Form 8872 (Political Organization Report of Contributions and Expenditures).  In addition, the IRS is required to make the information provided on the forms available to the public in a machine-readable format.  These changes are generally effective for tax years beginning after July 1, 2019.

IRS Notice for Failure to File

Under the old law tax-exempt organizations that failed to file an annual information return for three consecutive years automatically lost their tax-exempt status. 

The new law requires the IRS to provide notice to an organization that fails to file a return for two consecutive years.  The notice must state that the IRS has no record of receiving the return for two consecutive years and inform the organization that the tax-exempt status will be revoked if the organization fails to file a return by the due date for the next return.  The notice must also contain information about how to comply with the annual information return requirements.  This applies to failure to file returns for two consecutive years if the return for the second year is required to be filed after December 31, 2019. 

Posted by: Carrie Minnich, CPA